The Future of BNPL Pt.1
By now you are familiar with the buy now, pay later (BNPL) payment option. It is a highly popular payment option that allows consumers to purchase and receive goods or services immediately and to pay off the purchase price in instalments over an agreed period of time. Another reason for the popularity is that if the consumer pays on time, they pay no interest or fees. Managing Director of Power Retail, Grant Arnott suggests BNPL is too big to be ignored.
BNPL has exploded in popularity over the past five years throughout New Zealand and Australia. The numbers are impressive with as many as 3,000 popular retailers in New Zealand including Glassons, Kmart and Trade Me now offer BNPL options. Approximately 10% of the adult population in Australia have used at least one BNPL scheme. Millennials are currently the primary BNPL target group, but BNPL popularity is quickly migrating to other market segments.
The growth in BNPL has been dramatic in the Australian online shopper market. From 50,000 transactions per month in April 2016, to 1.9 million transactions in June 2018. Both shoppers and sellers agree that those consumers who use BNPL tend to spend more—on average between $100 and $249.
Sellers report that their customers also buy more items and shop more frequently on their site. Over half felt these effects immediately. Sellers have also observed that once tried, BNPL soon becomes a favorite payment option when online shopping, with 67% of BNPL customers still using the service 12 months on from their initial BNPL purchase.
Protecting Consumers a Concern
It is no surprise that when a service gains popularity, some providers can take advantage of consumers. Due to the fact that ‘buy now, pay later’ service providers don’t need to comply with responsible lending laws, there are growing concerns about misuse. To protect consumers, corporate watchdog Australian Securities & Investments Commission (ASIC) can take action where a buy now pay later provider engages in conduct that is misleading or unconscionable. Some of the potential changes to “product intervention” law could also give ASIC flexibility to address emerging products and services such as buy now pay later arrangements. 
BNPL offers consumers benefits. They are able to purchase items they might not have been able to afford and can avoid interest rates if they pay according to the agreement. It also helps small online sellers increase sales. But as BNPL continues to gain popularity, it is inevitable that some form of regulation will need to be applied to protect consumers.